Reward Cards: What To Look For And What To Avoid

In the old days, reward credit cards were primarily cards that would earn you airline miles. Those cards still exist, and are quite popular, but now you can earn everything from a new iPod to tickets to Disneyland.

It all sounds quite impressive - you use your credit card as you would any other card, but each time you use it you are earning "points" toward your chosen reward, whatever it may be. These cards can be a real boon to your vacation, your Christmas shopping, and perhaps even your clothes closet. But there are some things to be aware of, to be on the lookout for and to careful of.

Not all rewards cards are created equal. That is, some have restrictions that might result in you deriving little benefit from the card. Let's look at some crucial considerations you should make when choosing a rewards card.

First, consider why you want a rewards card. Do you want to earn airline miles? Gift certificates at certain stores? Whatever it is, make sure the card offers the right type of reward for your needs. If you choose an airline card, but that airline only offers limited flights from your local airport, you should find an airline card with which you can really maximize any benefits you get.

Likewise, if you find a card that offers double points on purchase like gas and groceries, but you use your card primarily for purchases of travel and clothing, you won't earn as many points.

The lesson here: Read the fine print so you can get the best bang for your rewards credit card buck.

Second, always read the fine print before you sign up. It might sound like it's easy to earn rewards but you might find that with most cards points are not matched dollar for dollar. That is, if you spend $100, you don't necessarily earn 100 points (or miles, or whatever your card rewards you with). You might earn 500 points for every $1,000 in purchases. If your card rewards you with gift certificates at a favorite store, you might have to spend $1,000 to earn a $10 credit.

The lesson here: This lesson is the same as our last one, which is read the fine print and, in this case, do a little math. With the fine print at your fingertips, do the math to figure out if this is a good deal for you. Will you spend enough money each quarter or year to earn satisfactory rewards?

Third, use the card as often as you can. Of course, you don't want your balance revolving from one month to the next, but charge everything you would normally use cash for. If you know you'll pay the balance each month, then it makes sense to pay for everything with your rewards credit card - you'll be surprised how quickly your rewards will grow when you use the card for everything from gas to groceries to movie tickets. And don't forget recurring charges - like your satellite or cable television service, your utilities, and the like. If you can use a credit card to pay for these services, do.

The lesson here: If you are careful with credit, you can earn your rewards quickly by remembering to use your card for a multitude of purchases.

Finally, don't lose your rewards. Pay attention to expiration dates (or blackout dates) or anything else that might affect when and how you can use your rewards. It would be a shame to be diligent in earning the rewards only to lose them because you didn't pay attention to that bit of fine print.